Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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BENEFIT TRANSFER – SELECTED REFERENCES FROM INTERNATIONAL LITERATUREAdamowicz, W., Louviere, J. and Williams, M., 1994. Combining revealed and stated preference methods for valuing environmental amenities.Journal of Environmental Economics and Management 26:271-292.Alberini, A., Cropper, M., Fu, T.-T., Krupnick, A. Liu, J.-T, Shaw, D. and Harrington W. 1997, Valuing health effect of air pollution indeveloping countries: the case of Taiwan, Journal of Environmental Economics and Management, 34 (2), 107-26Bergstrom, J.C. and De Civita, P., 1999. Status of Benefits Transfer in the United States and Canada: A Review, Canadian Journal of AgriculturalEconomics 47, pp. 79-87.Boyle, K. J. and Bergstrom, J. C., 1992. Benefit Transfer Studies: Myths, Pragmatism and Idealism, Water Resources Res. 28(3), pp. 657-663.Brouwer, R. and Bateman, I., 2005, The temporal stability of contingent WTP values, Water Resource Research, 4(3) W03017.Brouwer, R. and F. A. Spaninks, 1999. The Validity of Environmental Benefit Transfer: Further Empirical Testing, Environmental and ResourceEconomics, 14, pp. 95-117.Desvousges, W.H., Johnson, F.R. and Banzhaf, H., 1998. Environmental Policy Analysis with Limited Information: Principles and applicationsof the transfer method. Massachusetts: Edward Elgar.Downing, M., Ozuna Jr., T., 1996. Testing the Reliability of the Benefit Function Transfer Approach. Journal of Environmental Economics andManagement. 30(3), pp. 316-322.Garrod, G. and Willis, K., 1999, Benefit Transfer, in Economic Valuation of the Environment: Methods and Case Studies, Edward ElgarPublishing Limited, Cheltenham, UK.Kirchhoff, S., Colby, B.G. and LaFrance, J.F., 1997, Evaluation the Performance of Benefit Transfer: An Empirical Inquiry, Journal ofEnvironmental Economics and Management, 33, pp. 75-93.Kristofersson, D. and Navrud, S., 2001. Validity Tests of Benefit Transfer: Are We Performing the Wrong Tests?, Discussion Paper D-13/2001,Department of Economics and Social Sciences, Agricultural University of Norway.Leon, C.J., Vazquez-Polo, F.J., Guerra, N. and Riera, P., 2002, A Bayesian Model for Benefits Transfer: Application to National Parks in Spain,Applied Economics, 34, pp. 749-757.Lovett, A.A., Brainard, J.S. and Bateman, I.J., 1997, Improving Benefit Transfer Demand Functions: A GIS Approach, Journal ofEnvironmental Management, 51, pp. 373-389.Ready, R., Navrud, S., Day, B., Dubourg, R., Machado, F., Mourato, S., Spanninks F. and Vazquez, R., 2004. Benefits Transfer in Europe: AreValues Consistent Across Countries?, Environmental and Resource Economics, Volume 29, Number 1, pp. 67 - 82.Rosenberger, R., Loomis, S. and John, B., 2001. Benefit Transfer of Outdoor Recreation Use Values: A technical document supporting theForest Service Strategic Plan, (2000 revision). Gen. Tech. Rep. RMRS-GTR-72. Fort Collins, CO: U.S. Department of Agriculture, ForestService, Rocky Mountain Research Station.Silva, P. Pagiola, S., 2003, A Review of Valuation of Environmental Costs and Benefits in World Bank Projects, Environmental Economic SeriesNo.94, Environmental Department, Washington DC, the World BankClimate changeClimate change costs have a high level of complexity due to the fact that they are long-term and global and becauserisk patterns are very difficult to anticipate. As a result there are difficulties in valuing the damage caused. Therefore,a differentiated approach (looking both at the damage and the avoidance strategy) is necessary. In addition long-termrisks should be included.The climate change or global warming impacts on production and consumption activities are mainly caused byemissions of greenhouse gases carbon dioxide (CO 2 ), nitrous oxide (N 2 O) and methane (CH 4 ). To a smaller extent,emissions of refrigerants (hydro fluorocarbons) from Mobile Air Conditioners (MAC) also contribute to globalwarming.Climate change impacts have a special position in external cost assessment:- climate change is a global issue, so the impact of emissions is not dependent on the location of the emissions;- greenhouse gases, especially CO 2 , have a long lifetime in the atmosphere so that present emissions contribute toimpacts in the distant future;- the long-term impacts of continued emissions of greenhouse gases are especially difficult to predict butpotentially catastrophic.Scientific evidence on the causes and future paths of climate change is becoming increasingly consolidated. Inparticular, scientists are now able to attach probabilities to the temperature outcomes and impacts on the naturalenvironment associated with different levels of stabilisation of greenhouse gases in the atmosphere.The proportion of greenhouse gases in the atmosphere is increasing as a result of human activity; the sources aresummarised in this figure:228
Figure F.2 Greenhouse-gas emissions in 2000Other energyrealted5%Waste3%Industry14%Power24%Agriculture14%Transport14%Source: Stern Review 2006Land use18%Buildings8%As we all know, there is great uncertainty attached to climate change projections based on anthropogenic emissionsand to the associated expected environmental damage and external costs. The available figures range from the€20/tonne estimate for the CO 2 permit trading price to the higher values estimated in literature (€140 and €170,respectively, in INFRAS-IWW (2002) and ETSAP-Sweden (1996). Recently the Stern Review 122 suggested an averagedamage value of €75/tonne CO 2 . The following diagram shows the recommended values estimated by the ImpactStudy 123 .Figure F.3 Recommended values for the external costs of climate change(€/tonne CO2)2001801601401201008060402002010 2020 2030 2040 2050LowervalueCentralvalueUppervalue122123‘The Economics of Climate Change’, www.sternreview.org.uk, 2006Impact Handbook of Estimation of External Costs in the Transport Sector, December 2007229
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ACRONYMS AND ABBREVIATIONSBAUB/CCBA
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TABLESTable 2.1 Financial analysis
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FIGURESFigure 1.1 Project cost spre
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Cohesion Fund, and through the leve
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or the plant will not reveal excess
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CHAPTER ONEPROJECT APPRAISAL IN THE
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Some specifications for financial t
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FOCUS: INFORMATION REQUIREDGeneral
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In particular, CBA results should p
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CHAPTER TWOAN AGENDA FOR THE PROJEC
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objectives, are, as far as possible
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considered the appropriate shadow p
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2.3.2 Feasibility analysisFeasibili
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This approach will be presented in
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Current assets include:- receivable
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The following items are usually not
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Mainly, the examiner uses the FRR(C
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The dynamics of the incoming flows
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eturn on their own capital (Kp). Th
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While the approach presented in thi
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2.5.1 Conversion of market to accou
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Table 2.9 Electricity price dispers
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2.5.1.2 Fiscal correctionsSome item
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previously estimated in projects wi
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FOCUS: ENPV VS. FNPVThe difference
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2.6 Risk assessmentProject appraisa
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Table 2.14 Impact analysis of criti
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Figure 2.6 Probability distribution
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eneficiary. The project proposer sh
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There are many ways to design an MC
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PROJECT APPRAISAL CHECK-LISTCONTEXT
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- reduction of congestion by elimin
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- the methods applied to estimate e
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- the marginal external costs: cong
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- the benefits for the existing tra
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The following tables show some refe
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3.1.1.6 Risk assessmentDue to their
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As shown in Figure 3.1, only under
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3.1.3.7 Other project evaluation ap
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- Waste Management Hierarchy rules
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The time horizon for a project anal
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every user support the total costs
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Territorial reference frameworkIf t
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Cycle and phases of the projectGrea
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One of the most important aims of t
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projects, as in other sectors in wh
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3.2.3.2 Project identificationBasic
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In order to evaluate the overall im
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for regassification plants, number
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Examples of objectives are:- change
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decontamination if any;- the techni
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3.3.3.6 Risk AnalysisCritical facto
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3.3.4.6 Risk assessmentCritical fac
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3.4.1.5 Economic analysisThe follow
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Financial inflows• Admission fees
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expectancy suitably adjusted by the
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The time horizon for project analys
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A Cost-Benefit Analysis should cons
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CHAPTER FOURCASE STUDIESOverviewThi
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- finally, there is the traffic tha
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c) Road users producer’s surplus:
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4.1.5 Scenario analysisTwo scenario
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The financial performance indicator
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Table 4.10 Economic analysis (Milli
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Table 4.12 Financial return on capi
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4.2 Case Study: investment in a rai
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4.2.4 Economic analysisThe benefits
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Financial investment costs have bee
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Figure 4.6 Results of the risk anal
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Table 4.22 Economic analysis (Milli
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4.3 Case Study: investment in an in
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ate of 0.6% per year is assumed for
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The shadow price of the CO 2 avoide
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As a result, the probability distri
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16 17 18 19 20 21 22 23 24 25 26 27
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4.4 Case Study: investment in a was
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4.4.2 Financial analysisAlthough in
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THE CALCULATION OF REVENUESReferrin
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0.15 m 3 /m 2 a depreciation of 20%
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As result, the probability distribu
Page 178 and 179: Figure 4.13 Probability distributio
Page 180 and 181: Table 4.48 Financial return on nati
Page 182 and 183: Table 4.50 Financial return on priv
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Page 186 and 187: 4.5 Case Study: industrial investme
Page 188 and 189: 4.5.4.1 Investment costsThe total i
Page 190 and 191: Finally, a residual value was estim
Page 192 and 193: This analysis shows the need to pay
Page 194 and 195: Table 4.62 Financial return on inve
Page 196 and 197: Table 4.64 Return on private equity
Page 198 and 199: Table 4.66 Economic analysis (thous
Page 200 and 201: ANNEX ADEMAND ANALYSISDemand foreca
Page 202 and 203: The method applied for the forecast
Page 204 and 205: Furthermore, travel demand depends
Page 206 and 207: This Guide supports a unique refere
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Page 210 and 211: Figure C.1 Project ranking by NPV v
Page 212 and 213: The main problems with this indicat
Page 214 and 215: EXAMPLE OF SHADOW WAGE IN DUAL MARK
Page 216 and 217: Another exhaustive way to include d
Page 218 and 219: Figure E.2 Percentage of low income
Page 220 and 221: ANNEX FEVALUATION OF HEALTH &ENVIRO
Page 222 and 223: Figure F.1 Main evaluation methodsS
Page 224 and 225: - expenditure on capital equipment
Page 226 and 227: due to air pollution or water conta
Page 230 and 231: ANNEX GEVALUATION OF PPP PROJECTSIt
Page 232 and 233: adjustments for Competitive Neutral
Page 234 and 235: ANNEX HRISK ASSESSMENTIn ex-ante pr
Page 236 and 237: Reference ForecastingThe question o
Page 238 and 239: Figure H.5 Levels of risks in diffe
Page 240 and 241: ANNEX IDETERMINATION OF THE EU GRAN
Page 242 and 243: A.4. Technological Alternatives and
Page 244 and 245: GLOSSARYAccounting period: the inte
Page 246 and 247: Market price: the price at which a
Page 248 and 249: BIBLIOGRAPHY1. ReferencesBelli, P.,
Page 250 and 251: Ray, A. 1984, Cost-benefit analysis
Page 252 and 253: EnvironmentGeneralAtkinson, G., 200
Page 254 and 255: European Commission, DG Tren, 2003,
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Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

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